MNI: BOE MPC Leaves Policy Unchanged; 2 Members Back More QE

-Seven-to-Two Vote For Unchanged QE; Haskel, Saunders Dissent

By David Robinson

     LONDON (MNI) - The Bank of England Monetary Policy Committee left policy

unchanged Thursday, confounding some expectations of an increase in the size of

its asset purchase programme.

     The MPC split seven-to-two over the decision to leave the asset purchase

target at GBP645 billion, with two members voting to raise it by GBP100 billion,

and all nine backing leaving Bank Rate on hold at 0.1%.

     The following are key points from the minutes and policy decision:

     -Jonathan Haskel and Michael Saunders both voted to increase total

quantitative easing to GBP745 billion.

     Their argument in favour of the GBP100 billion increase relied on timing.

They took the view that the Bank should make clear it would continue with its

current rapid pace of gilt buying for the next three months. "They judged that

it would be preferable to announce now that the current pace of asset purchases

would be maintained at least until the time of the August Monetary Policy

Report," the minutes stated.

     -The majority view was that further stimulus might well be needed but they

argued that they could wait and see how events unfolded in coming weeks. 

     "The prospective weakness in employment and inflation, and downside risks

around aspects of the medium-term outlook, might necessitate further monetary

policy action to support the economy in the future," the other members agreed.

     The government is set to provide a framework for easing the lockdown in

response to the coronavirus and details are lacking as yet on the likely

tapering of income support provided by the Treasury. 

     "The Committee would learn more about the economic outlook as a plan for

starting to relax Covid-related restrictions on activity was announced," the

minutes said.

     -All MPC members agreed that the MPC would act rapidly if the currently

orderly gilt market were to become dysfunctional again, as it had been in

mid-March before the Bank stepped in with fresh QE.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

[TOPICS: M$B$$$,M$E$$$,M$$BE$]